Question: Assume you want to retire early at age 54 You

Assume you want to retire early at age 54. You plan to save using one of the following two strategies: ( 1) save $ 5,100 a year in an IRA beginning when you are 29 and ending when you are 54 ( 25 years) or ( 2) wait until you are 42 to start saving and then save $ 10,625 per year for the next 12 years. Assume you will earn the historic stock market average of 12% per year.

1. How much out- of- pocket cash will you invest under the two options?
2. How much savings will you have accumulated at age 54 under the two options?
3. Explain the results.
4. If you were to let the savings continue to grow for eight more years (with no further out- of- pocket investments), under each scenario, what will the investments be worth when you are age 62?

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  • CreatedAugust 27, 2014
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